Investing on stocks or a business venture is often seen as a gamble as there’s always the possibility of losing one’s capital instead of gaining reasonable returns. However, the rhetoric is only as far as the element of risk is concerned because unlike in gambling where luck is a key element, investing involves applications of several thought processes. Many who seriously considered gambling as a lucrative source of income eventually learned the hard way that it’s not.
Although there are professional gamblers who are able to enrich themselves through gambling, most of them take only calculated risks in order to minimize, if not avoid huge losses. In gambling, luck is a significant factor since a gambler cannot control the cards being dealt as hand; or even know for sure the outcomes produced by the Random Number Generator. Moreover, based on experience and historical data, seasoned gamblers acknowledge the fact that the house always has greater chances of winning.
Can Risk Management Apply to Gambling
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The expectations in both investing and gambling activities is the potential gain that can be derived from the process of exposing one’s money to elements of risk. The higher the risk involved the higher the expected return. Conversely, low risk means lower expected returns.
In both cases, loss is always a possibility, which makes risk management important in order to protect one’s investment. While risk management is not largely applicable where gambling activities are concerned, gamblers can at least use the risk management strategies used by investors to protect their capital against huge losses.
Deciding on how much of their capital they want to expose to potential losses is one good way to start. Since gambling activities are short term, it’s always a good practice to establish a specific amount as betting money that you can afford to lose once the odds are stacked against your favor.
Diversification is another risk management strategy that investors use as a way to spread the expectations for risks and returns on different income-earning opportunities. In sports betting, savvy sports bettors avoid staking all their betting money on a single product. Since the outcomes of sports matches are generally unpredictable, they do not discount the possibility of cashing out early to minimize losses.
Managing risks also entails reviewing trading patterns, studying stock charts and analyzing trading signals. They look for clues on what and where most stock investors are generally realizing fair returns from the performances of their stock investments.
Many gamblers follow similar practices by looking at team and player stats, or the betting strategies, mannerisms and habits of their gambling opponents. That way, they can take cues and calculate the risks they face if they call a bet.
Gamblers who practice risk management as part of their wagering strategies do not chase losses, which is one of the pitfalls of gambling addiction.
In the UK, punters have to be mindful of their gambling activities as any indication of excessive gambling automatically sets off the Gamstop self-exclusion program. It’s an anti-gambling addiction mechanism mandated by the UK government on all online casinos.
Still, a Casino not on gamstop remains the preferred choice among professional gamblers since their years of experience have already instilled in them the self-discipline required by their chosen profession.